Final answer:
Artificial intelligence is expected to significantly increase labor productivity, potentially contributing to a 7% rise in global GDP. It may also reshape labor demand, reducing it for low-skill workers while increasing it for high-skill workers. The overall effect on productivity could be substantial, though exact figures are speculative and depend on technological advancements and regulatory measures.
Step-by-step explanation:
By 2035, artificial intelligence is expected to have a significant effect on labor productivity. Economists have discussed various potential impacts of AI on the labor market. According to information from Goldman Sachs, AI could potentially boost the overall global GDP by as much as 7% within the next ten years. This increase in GDP could be due to increases in labor productivity, which might be much higher than slight improvements. There is, however, a caveat; AI could disrupt labor markets by eliminating or putting at risk a substantial number of jobs, estimated to be around 300 million worldwide.
When examining how AI influences the labor market, we can notice that it will likely change the demand for different types of labor. For low-skill labor, as AI becomes a more efficient substitute, demand may decrease. Conversely, for high-skill labor which may complement AI technologies, demand could increase. Ultimately, regulatory guidelines and smooth transition strategies will be crucial in mitigating the adverse effects on the labor market.
If we relate AI's impact to changes in the Aggregate Supply (AS) curve, in the absence of other changes, increased worker productivity generally shifts the AS curve to the right, showing growth in the economy's potential output. When worker productivity increases, more goods and services can be produced at the same cost, which can lead to higher economic growth and potentially increase labor productivity by a significant margin, possibly up to 40% as mentioned in some forecasts.